Kentucky answers FAQs about the CARES Act and COVID-19

[Pages:2]Kentucky answers FAQs about the CARES Act and COVID-19

Kentucky posted answers to frequently asked questions about:

? corporate and personal income tax conformity to selected provisions under the Coronavirus Aid, Relief, and Economic Security (CARES) Act;

? the impact of COVID-19 tax deadline extensions on limitation periods and interest on tax overpayments; and

? withholding obligations for telecommuting employees.

CARES Act conformity. The federal conformity tie-in date for computing Kentucky corporate and personal income tax liability does not adopt CARES Act provisions that:

? suspended the 80% taxable income limitation for IRC Sec. 172 net operating loss (NOL) carry forwards until 2021;

? modified IRC Sec. 170 charitable deduction limits for cash contributions in the 2020 tax year;

? increased the limit on IRC Sec. 163(j) business interest expense deductions from 30% to 50% of a taxpayer's adjusted taxable income (ATI) for the 2019 and 2020 tax years;

? added a $300 above-the-line charitable contribution deduction for individuals who do not itemize; and

? postponed the IRC Sec. 461(l) limitation on the excess business losses of noncorporate taxpayers.

Kentucky also does not allow NOL carry back deductions by corporate or personal income taxpayers. So, it does not recognize the 5-year carry back period enacted by the CARES Act for NOLs from tax years after 2017 and before 2021.

Taxpayers can exclude income from loans forgiven under the CARES Act Paycheck Protection Program (PPP Loans). Like federal treatment, business expenses from PPP

? 2020 CCH Incorporated and its affiliates and licensors. All rights reserved.

loans are not deductible on a Kentucky return if the expenses relate to tax-exempt income. Limitation periods and interest. If the limitations period for audits and assessments expired on or after April 6, 2020, and before July 15, 2020, Kentucky has 30 days after the expiration date to audit and assess additional taxes. Taxpayers who filed a return for the 2019 tax year by the July 15, 2020 deadline have until July 15, 2024 to file a refund claim. Interest on tax overpayments will begin to run 90 days after July 15, 2020 for:

? calendar year returns; and ? fiscal year returns due on or after April 1, 2020, and before July 15, 2020 Withholding for telecommuting employees. Employer withholding obligations do not change for Kentucky residents or nonresidents who live in states that have a reciprocal agreement with Kentucky. The Kentucky Department of Revenue will continue reviewing state income tax nexus determinations on a case-by-case basis. (COVID-19 Tax Relief: Frequently Asked Questions, Kentucky Department of Revenue, July 16, 2020).

? 2020 CCH Incorporated and its affiliates and licensors. All rights reserved.

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